Wealth Management Blog | WrapManager | Retirement Planning (9)

The Stretch IRA: A Wealth Preservation Strategy That’s Easy to Use

Posted by Michael J. O'Connor | CWS®, Vice President Investments

May 8, 2014

The Stretch IRA strategy is a method for lengthening the life of your IRA assets, in hopes they span multiple generations. We stress the word “method” because the Stretch IRA is not actually a product – it’s a wealth preservation strategy your beneficiaries can use to stretch the life of the IRA assets they inherit from you.¹

We’ll explain how it’s done below, but first we’ll help you understand the benefits.

Stretching Your IRA Can Help It Grow Tax-Deferred Longer

Stretching your IRA can lower the required withdrawal amounts your heirs have to take each year, meaning the value of your IRA can grow tax-deferred longer – a benefit that can keep the IRA in the family for generations.

[+] Read More

Retirement Planning IRA Beneficiaries

Five Questions to Ask When Setting Up Your IRA Beneficiaries

April 30, 2014

One of the great things about setting up beneficiaries on your retirement and other investment accounts is that you can set them up virtually any way you want. You can relinquish complete control of your assets, or you can set up systems to maintain some control over how the assets are distributed. The choice is yours. When deciding how to assign beneficiaries on your retirement and other investment accounts (including your IRA beneficiaries), there are a few important considerations. Here are five questions to discuss with your financial advisor when discussing setting up your beneficiaries. [+] Read More

Retirement Planning: How Do You Plan for Things You Can’t Control?

April 28, 2014

You control many of the decisions leading into retirement: how much to save, what investments to make, how long you choose to work. But there are other factors – like market returns and policies regarding taxation, savings, and entitlements – that you can’t completely control. Or can you? The key word here is “completely” – with the right kind of investment planning, you can regain control of some of those less predictable aspects of retirement planning. Planning For Things You Can't Control (Click image for larger version) Source: The Importance of Being Earnest, J.P. Morgan Asset Management, 2013. [+] Read More

Relocating for Retirement? Health Care Costs Could Matter

April 24, 2014

If you’re thinking about moving to a different state, it’s important to consider how your health care costs could change depending on where you end up. The average cost for Medicare, Medigap and nursing homes could become cheaper, or more expensive. The following two maps of the United States illustrate the average cost for each based on state. On one level, the cost of Medicare and comprehensive Medigap plans varies from state to state. Medicare and Medigap Average Annual Cost per State at Age 65 (Click image for larger version) Source: JP Morgan Asset Management. SelectQuote, 2013. Traditional Medicare costs are based on national average cost estimates for Medicare Parts A, B, D and Medigap Plan F. Vision, dental and long-term care expenses are not included. Not shown on the chart: costs for Medicare Advantage. Medicare Advantage costs may vary from less than $500 per year to more than $10,000 per year. Data for Alaska and Hawaii not available. [+] Read More

Managing Your Retirement Income: What to Do During Down Markets

April 22, 2014

When mapping out the sources and timing of your retirement income payments, there’s an important risk we want to make investors aware of: withdrawing money from your portfolio during down markets. If you’re not careful, withdrawing money while the market declines can significantly impact your portfolio and your ability to meet your long-term retirement goals. This risk is especially palpable if you’re in the early stages of retirement, because it can be difficult to replenish your portfolio over time. During down markets, investors should consider adjusting their withdrawal rates and exploring other sources of retirement income. [+] Read More

Social Security Retirement Benefits: Your Timing Matters

April 16, 2014

Are you thinking of retiring soon, but are still unsure about when you should take Social Security retirement benefits? Here’s something you may not have known before: the Social Security retirement benefit system is set up to incentivize people to delay collecting benefits. If your financial situation enables you to delay collecting benefits, it could make a lot of sense for you to wait. Here’s a great introductory graphic that can help frame your thinking: Social Security Timing Tradeoffs (Click chart for larger version) Source: Social Security Administration, J.P. Morgan Asset Management. For illustrative purposes only. For 1955 - 1960, two months are added to the Full Retirement Age each year. [+] Read More

Retirement Planning: What If You Can't Work As Long As You Want To?

March 26, 2014

Make room for more baby boomers in the workplace. From 1989 to 2012, the percent of people over age 65 in the workforce jumped from a little under 12% to 18.5%, setting a trend that’s set to continue. Between 2010 and 2020, the number of workers age 65 to 74 is expected to grow at a faster pace than any other demographic. The sheer quantity of baby boomers entering the workforce accounts for some of this growth, but it’s also being driven by cultural forces—many baby boomers really enjoy working and staying busy.1 As Wealth Managers we focus on investors’ retirement goals and the ability to meet those goals. Would your retirement goals be compromised if you weren’t able to work past a certain age? Is there a backup plan? [+] Read More

3 Ways to Control Your Expenses in Retirement

March 25, 2014

The world’s largest asset manager, BlackRock,1 conducted a survey of 17,600 investors around the globe to uncover investor perspectives on retirement. BlackRock found that nearly half of respondents had a negative outlook on their financial futures, in large part because they were unsure if their retirement savings would outlast their retirement expenses.2 Do you feel this way too? Retirement is supposed to be enjoyed, not feared, and a solid investment plan can help wipe away those concerns. As a starting point, investors can think about ways to reduce retirement expenses to help allay concerns about having sufficient retirement savings. Here are three ideas to explore. [+] Read More

A “Wait and See” Approach Can Hurt Your Retirement

March 22, 2014

The 2008 financial crisis left many investors cautious about investing in stocks, and rightfully so. The thought of experiencing steep market declines is a recipe for losing sleep at night, and no investor wants that type of feeling about their portfolio. Investing with caution is understandable, but it’s to the point that many investors could be inadvertently hurting their retirement by choosing to remain in cash and other short term investments instead of putting their money to work. The Opportunity Cost of Waiting in Cash A recent survey by BlackRock found that nearly half of investor’s portfolios are in cash, with a relatively small proportion dedicated to longer-term investments like stocks. What’s more, half of those investors said they intend to keep that cash in their portfolios for the next 12 months, and 36% of investors said they plan on increasing their cash holdings over the course of the year.1 [+] Read More

What is the Optimal Fixed Income Strategy in Retirement?

March 17, 2014

Many investors need to own fixed income in their portfolios to provide income and reduce volatility. But what percentage of fixed income is the ideal amount? Research conducted by BlackRock suggests that the optimal allocation to bonds actually fluctuates widely over time. Since 1900, the average optimal allocation to bonds as shown in the chart has been about 43%. But as you can see below, there were long periods when owning more bonds made sense (when the blue line is above the overall average), as well as stretches where owning much less than 43% in fixed income was considered optimal, like in the 60’s, 70’s and 80’s.1 Average Optimal Allocation to Bonds 10-Year Periods, Using 1900-2010 Annual Data, Cross-Country Averages (Click chart for larger version) Source: BlackRock [+] Read More